Neil Liversidge: How RDR has killed off timewasters

Can you differentiate your best clients from your worst? I will give you a clue: the best ones pay. It sounds obvious but last year I chaired a seminar for Money Marketing and afterwards a number of business owners called me to discuss the problems they were still having in terms of getting paid realistic fees post-RDR.

Recurrent themes were consultants wanting to cut fees (but not their own pay) to get a piece of business, and timewasters. Businesses with the former problem have either an overcharging issue, a training issue or both. To deal with the latter I have evolved my own set of rules.

Firstly, we no longer routinely offer a “free” first meeting at a client’s home. Where business clients are concerned, plenty want an adviser to spend a couple of hours explaining automatic enrolment but most then DIY it. With this in mind, business owners wanting our advice on auto enrolment pay for all meetings, including the first, or we decline.

For private clients, we now charge a home consultation fee if a distant prospect wants a first meeting where they live, even if they are existing client referrals. If they are serious about doing business they will either come to us or commit to the home visit fee. If not, why would I waste my time on a 400-mile round trip?

“Haggling is not a part of our culture. We do not start with a high quote and then reduce the price; we price it right first time”

We also refuse to work on the promise of “jam tomorrow”. Frequently we have been asked to do something for free on the promise of lucrative business later, which never in reality materialises. We were once approached by a firm wanting us to set up a designated stakeholder scheme; however, they were not planning to pay any employers’ contributions and did not want to pay us either.

Instead the directors reckoned they would be using us for million-pound co-shareholder policies at some indeterminate date in the future, so we would earn a commission that way. I happened to know we were at least the third firm they had tried this ploy on so countered by saying we would be glad to set our fee against the commission when they eventually did their cover. We are still awaiting their call.

We absolutely do not negotiate on fees. We have worked out a scale that is fair and competitive so why would we work for less? Haggling is not a part of our culture. We do not start with a high quote and then reduce the price; we price it right first time so our first price is our only price.

If anyone reading this is tempted to say it cannot be done I refer them to the plaque on my office wall quoting the old Chinese proverb: “He who says it cannot be done should not interrupt the person doing it.” For this I have the RDR to thank. Pre-RDR I ran myself ragged for timewasters. The RDR made me look hard at what we did and how we charged. I still work as hard as ever but only for paying clients.

1. Home visits. Never did them. Clients came to my office or to the IOD in Pall Mall or Manchester (I am a member). If at the IOD, then I would have a minimum of 2 appointments on that day, more if possible. So not only is this more efficient – it saves money.

2. After an initial meeting (or perhaps two) I very rarely then saw clients face to face. I can assure you they were nevertheless well serviced, but letter, e-mail and phone (and sometimes Skype) did the trick. The firm that took Norwest Consultants over had difficulty getting their head round the fact that I hadn’t seen some clients face to face for ten years or more. Again, this saves time and money.

Focusing on your overheads and costs can and does help you to be competitive as far as fee charging is concerned – and I charged fees – even for life assurance. The client paid for the advice – whether or not a product resulted – another way to remain profitable. I do so very much agree with you about haggling. We are not in the Istanbul Grand Bazar and in fact I think it is an insult if you deem your fee to be competitive in the first place. I guess the reason some people haggle is because they have come across advisers whose charges are outrageous.

Of course as a canny Yorkshireman, I know I’m preaching to the converted, but down here in London there are daft advisers who seem intent on paying stupendous rents, just to be in posh locations – madness! There are also those who borrow up to their armpits – a definite case of Champaign tastes and brown ale money. You’d be amazed (if you made a search) of how many advisers are actually potless.

Yes, you are right – it can be done. You do it and I certainly did it. I always made a profit and was always solvent with a good credit rating. Choose your clients with care – just as they may choose you. And don’t bother with those who you patently know will not be worth the effort.

I have to admit I was a little shy about approaching initial fees as we used to do ‘a review of what you have’ for free but it appears the shyness was mine. Client don’t mind paying.

Our starting point is £400 plus VAT for a basic review, write off for the info and make some general observations about fund choices, charges, etc – stuff most clients don’t understand or consider. If they want to move to the next stage and I make and implement some recommendations we charge again. We always get a signed fee agreement before we start anything covering both sets of charges. The agreements always come back and the fees always paid. Like you I thank RDR for that.

However after a recent compliance annual meeting I was surprised to be told that my approach was unusual. I was just wondering what anybody else does and is it so different…

Interesting feedback. We still do some home visits because, amongst other reasons, we have some frail and elderly clients. I guess basically we try to balance out what’s commercial and what’s reasonable. In my life’s experience if you approach things from a position of reasonableness you’ll rarely go far wrong.

I am not saying I disagree with this article, but time wasters have always been there, pre and post RDR, Like very many others I was charging fees way before the RDR, and always (99% of the time) charged for an initial meeting, I recall Neil you wrote a good article on having to “sack” a client, so on the flip side it is just as important to “vet them” (if that is the right phrase) before they even become a client ! the very real point post RDR really crucified those who don’t really “get” paying for advice, as there was always commission, whatever you think on this being good or bad; in their eyes they never paid for advice, in the same vain, by spending on their credit card they never spent anything ?
Which is why RDR completely cut out a very large section of today’s society, IE-: they want to save and invest, but want it on tick (so to speak)…… mentality will change, but it will take a long time, but in the mean time there will be a huge gap, “cost of delay” I term it as.

You can take this even further, by saying, if you are screening, before you take them on as a client, you are a lot less likely to get NTU’s, your persistancy will be good, they will tend to stay with you for life and complaints will be nil or at least very low

People never have, and never will value “free” ! and what you get when regulation is thought up in a board room ?

Thank you DH for your considered and interesting response. The freestyle discussion we had at and after Money Marketing’s Leeds conference last year brought out a number of interesting contributions around this theme. It was a good event and if MM runs them again this year you should attend.

It is important to ‘vet’ prospective clients. We vet investment clients to ensure they can understand and accept risk. Then we go on as part of the fact-finding process to ascertain how much. It’s an art though, not a science, whatever the FCA might want to pretend. We’ve had a few prospective clients over the years – a very small number – who really could not accept any risk at all. We declined to take them on and advised them to self-manage their cash. (I’ve written on that subject before elsewhere.) I could write more but you’ve given me an idea for a follow up article, so I’ll save it for that! Many thanks again and please accept my kindest regards.